Varun Beverages Limited Q4 & CY2017 Results Presentation - PowerPoint PPT Presentation

February 16, 2018 (a PepsiCo franchisee) Varun Beverages Limited Q4 & CY2017 Results Presentation

Disclaimer (a PepsiCo franchisee) Certain statements in this communication may be ‘forward looking statements’ within the meaning of applicable laws and regulations. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Important developments that could affect the Company’s operations include changes in the industry structure, significant changes in political and economic environment in India and overseas, tax laws, import duties, litigation and labour relations. Varun Beverages Limited (VBL) will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. 2

Table of Content (a PepsiCo franchisee) Company Overview 1 Q4 & CY2017 Results Overview 2 Financial Highlights 3 Industry Prospects 4 Annexure 5 3

Company Snapshot (a PepsiCo franchisee) Key player in the beverage industry Operations spanning across 6 countries – 3 in the Indian Subcontinent (India, Sri Lanka, Nepal) contribute ~ 90% to revenues; 3 in Africa (Morocco, Zambia, Zimbabwe) contribute ~10% Over 25 years strategic association with PepsiCo – accounting for ~ 51% of PepsiCo’s beverage sales volume in India and present in 21 States and 2 UTs Total Sales Volumes (MN Cases*) 2012-2017: Sales Volume CAGR: ~15.4% 52 55 31 26 21 22 224 224 209 144 132 114 2012 2013 2014 2015 2016 2017 India International 4 Note: *A unit case is equal to 5.678 liters of beverage divided in 24 bottles of ~ 237 ml each

Brands licensed by PepsiCo (a PepsiCo franchisee) Manufacturing & Distribution: Carbonated Soft Drinks Juice Based Drinks Carbonated Juices Energy Drink Packaged Water Distribution: Sports Drink Dairy Juice Based Drinks 5

Key Player in the Beverage Industry – Business Model (a PepsiCo franchisee) VBL- END-TO-END EXECUTION ACROSS VALUE CHAIN MANUFACTURING Concentrate Other Raw SOLID INRASTRUCTURE 23 state-of-the-art production facilities Bottling  (PepsiCo) Materials 72 owned depots  DISTRUBUTION & WAREHOUSING ROBUST SUPPLY CHAIN 2,122 owned vehicles  1,049 primary distributors  VBL - local level promotion and in-store activation  CUSTOMER MANAGEMENT DEMAND DELIVERY Installed 474,500 visi-coolers  PepsiCo - brand development & consumer marketing  Experienced region-specific sales team  MARKET SHARE GAINS IN-MARKET EXECUTION Responsible for category value/volume growth  Production optimization  COST EFFICIENCIES MARGIN EXPANSION Backward integration  Innovation (packaging etc)  Working capital efficiencies  ROE EXPANSION / Disciplined capex investment CASH MANAGEMENT  FUTURE GROWTH 6 Territory acquisition 

Symbiotic Relationship with PepsiCo (a PepsiCo franchisee) VBL – Demand Delivery PepsiCo – Demand Creation 25 yrs + Association  Investment in Production Facilities –  Owner of Trademarks manufacturing plants  Investment in R&D – Product &  Sales & Distribution – Vehicles Packaging innovation  In-outlet Management – Visi-Coolers ~51% of  Concentrate Supply PepsiCo India  Market Share Gains – Consumer Sales Push Management  Brand Development – Consumer Pull Volume Management 7

Chairman’s Message (a PepsiCo franchisee) Commenting on the performance for Q4 & CY2017, Mr. Ravi Jaipuria, Chairman – Varun Beverages Limited said, “ I am pleased to report we have completed our first year post listing delivering a robust performance with net profit growing 346% to Rs. 214 crore. This is despite a challenging year with the residual impact of demonetisation and de-stocking by trade ahead of GST implementation which impacted volumes. We have focused on initiatives where we can drive the outcome and improve operating parameters to create a more efficient and sustainable business and can now take advantage of the improving external conditions to accelerate growth. We have concluded the acquisition of PepsiCo India’s previously franchised territories of the State of Odisha, parts of Madhya Pradesh, Chhattisgarh, Bihar and undergoing due-diligence in Jharkhand. These are highly under-penetrated regions and provide huge opportunity for increasing volumes and gaining market share, and in line with the Company’s strategy to expand into contiguous territories to garner better operating leverage and asset utilization through economies of scale. VBL is now a franchisee for PepsiCo products across 21 States and 2 Union Territories and accounts for ~51% of PepsiCo’s beverage sales volumes in India from ~45% a year ago. We have also undertaken a greenfield expansion in Zimbabwe and commercial production is expected to commence soon. This is an untapped market with huge potential and as the sole franchisee of PepsiCo, we are confident of replicating the success that we have had in Zambia, in Zimbabwe as well. We remain agile by keeping on top of new trends and changes in consumer preferences, working closely with PepsiCo India to adjust our product portfolio and processes accordingly. After the launch of zero calorie ‘Pepsi Black’ and the energy drink ‘Sting’ earlier in the year, during the quarter, we entered into a strategic partnership for selling and distribution of the larger Tropicana portfolio that includes Tropicana Juices (100%, Delight, Essentials), Gatorade in the Sports drink category and Quaker Value-Added Dairy in territories across North and East India. VBL has proved its resilience against challenges with its successful performance in 2017. We are present in geographies that offer great long term, sustainable growth opportunities. Average per capita consumption rates are significantly lower than global averages, in contrast to the stronger GDP growth, increasing disposable incomes and young demographics. So in a normalized year, we are confident of delivering strong growth on the back of our solid business model and expanded 8 product portfolio. ”

Key Developments – Acquisition of territories (a PepsiCo franchisee) Concluded the acquisition of PepsiCo India’s previously franchised territories of the State of Odisha and parts of Madhya Pradesh along with two manufacturing units at Bargarh (Odisha) and Bhopal (Mandideep, MP) w.e.f. 27th Sep 2017 Bihar Concluded the acquisition of PepsiCo India’s previously franchised territory of the State of Chhattisgarh w.e.f. 11th Jan 2018 Madhya Pradesh Acquired franchisee rights of PepsiCo India’s previously franchised territory of the Jharkhand State of Bihar w.e.f. 17th Jan 2018 Odisha Chhattisgarh Acquired a manufacturing unit at Cuttack (Odisha) w.e.f. 19th Jan 2018 Signed BTA for the acquisition of PepsiCo India’s previously franchised territories of the State of Jharkhand along with a manufacturing unit at Jamshedpur on 20th Dec 2017 (due-diligence process ongoing) Total consideration for above acquisitions is approx. Rs. 2,550 million and further we expect to spend approx. Rs. 350 • million in upgrading the plant & machinery and marketing assets in these territories Newly acquired regions are highly under-penetrated and provide huge opportunity for increasing volumes and gaining • market share These acquisitions are in line with the Company’s strategy to expand into contiguous territories to garner better • operating leverage and asset utilization through economies of scale With above acquisitions, VBL has got increment PepsiCo India volumes of 6% and additional consumer base of ~21% of • India’s population VBL is now a franchisee for PepsiCo products across 21 States and 2 Union Territories and accounts for ~51% of PepsiCo’s • 9 beverage sales volumes in India

Key Developments - New Products Launches (a PepsiCo franchisee) Launched Pepsi Black, a zero calorie cola flavor CSD product currently available in • 250ml cans and 250 ml non-returnable glass bottles PEPSI BLACK Launch is part of PepsiCo’s plan to intensify focus on health and nutrition, reduce • sugar content in beverages Launched Sting, a carbonated energy drink available in 250ml cans and 250 • ml PET bottles with a highly competitive price point as compared to other brands in the segment STING The energy drinks contains approx. 50% less sugar than the regular CSD • products and 70 calories per 250ml serving Entered into a strategic partnership for selling and distribution of the larger Tropicana • TROPICANA portfolio that includes Tropicana Juices (100%, Delight, Essentials) in territories across North and East India GATORADE / Entered into a strategic partnership for selling and distribution of Gatorade and • QUAKER OAT Quaker Value-Added Dairy in territories across North and East India MILK 10